The sale of Xavier Niel’s Golan Telecom is heating up, with three out of its four mobile rivals now undertaking due diligence. Any offer will test the Ministry of Communications (MoC) and Antitrust Authority’s stance on consolidation, as they have both until now favoured the country’s five-player, ultra-competitive market, which serves 8 million people.
Cellcom (TASE:CEL), Bezeq (
Advisers to the three suitors now have access to the data room, reported Globes. The process is being run by Rothschild.
The regulatory view
Both the Ministry of Communications (MoC) and Antitrust Authority, which are fairly aligned in their thinking, are understood to believe that the ultra-competitive market’s current ARPU – an average NIS60 (US$15) per month, with some operators acquiring new subscribers at NIS30-35 (US$7.75-9) per month – does not support investment.
While acknowledging that five mobile network operators is “a lot,” officials are thought to like having a maverick in the market and do not necessarily see consolidation as the solution.
In the meantime, officials will be watching closely as operators roll out 4G, likely holding fire on both M&A and network sharing agreements until they have had time to observe the impact on the overall market.
The MoC allocated 4G licences to the country’s five operators in mid-August following a tender conducted at the start of the year. Hot, Bezeq and Partner said they will launch full services, but Golan and Cellcom’s service roll-out has been delayed due to the questions over their planned network JV.
Pelephone, Hot, Cellcom and Golan were not available for comment by the press deadline.
In September, Cellcom issued a statement of its interest in either Golan or its assets, following an approach by Rothschild.
History of Golan
Created by French-Israeli businessman Michael Golan and his partners – notably Xavier Niel, the founder of Iliad, which owns French disruptive operator Free – Golan Telecom won a 3G licence in 2012.
Golan has taken a similar approach to Iliad, undercutting its larger rivals on price, and in three years has built a subscriber base of 852,000. Cellcom, for its part, has 2.848 million subscribers, Partner 2.747 million, Pelephone 2.566 million and Hot 974,000.
Golan is reportedly looking at a potential sale now because the political environment in the country is changing. It might be forced to build a network covering 40% of the country, which was agreed under the original licence terms.
The company subsequently came to a roaming agreement with Cellcom, saving significantly on capex.
The two companies are also seeking Ministry of Communications (MoC) approval for a network joint venture, following a decision in April to allow a similar agreement between Partner and Hot. The government has so far been resistant to the Cellcom/Golan sharing deal, which they criticise as being closer to an MVNO agreement, given their vast difference in size.
Network JVs are viewed by some as a precursor to M&A, an industry executive explained to TelecomFinance in May.